THE SKY HASN ’ T FALLEN An Evaluation of the Minimum - Wage Increase

In the summer of 1996, Congress voted to increase the federal minimum wage from $4.25 to $5.15 per hour. On August 20, 1996, President Clinton signed the legislation, which implemented the increase in two stages: a $0.50 per hour increase on October 1, 1996, followed by a $0.40 increase on September 1, 1997. Supporters argued that the bill would raise the earnings of millions of low-wage workers and primarily benefit the poorest working families. Opponents claimed that the increase would lead to widespread job loss among the very workers the legislation was intended to help. The first stage of the increase has been in effect for over six months, and it is now possible to investigate these claims. This paper examines data from the U.S. government’s monthly Current Population Survey for the six months from October 1996 through March 1997 (and for the same period a year earlier) to assess the impact of the minimum-wage increase on the distribution of wages, the distribution of family income, and the employment opportunities of low-wage workers. While the analysis deals only with the first six months at the new wage level, these early results suggest clearly that: